By Keith Jenkins June 28 (Bloomberg) -- The pound rose to its highest level against the dollar in seven weeks as Group of 20 leaders endorsed budget-deficit targets, said they’ll focus on nurturing growth and avoided taxing banks. Sterling also gained against the euro, reaching its strongest level in nineteen months, while two-year gilts slipped as investors prepared to absorb debt sales across Europe. President Barack Obama said the G-20’s goal of cutting deficits in half by 2013 reflects U.S. targets and takes into account fiscal and economic needs of each nation. Prime Minister David Cameron said the U.K.’s austerity budget, unveiled last week, would help keep “a level of confidence” in the economy. “The G-20 was the classic compromise solution with something for everyone despite the divergent views,” said Ian Stannard, senior foreign-exchange strategist at BNP Paribas SA in London. “The fact that banking reform is being pushed a little bit to the back of the agenda may help sterling at the margin,” given the finance industry’s importance to the British economy, he said. The pound gained 0.3 percent to $1.5110 at 4:15 p.m. in London after reaching $1.5120, its highest level since May 6. The U.K. currency appreciated 0.6 percent to 81.64 pence per euro after reaching 81.58 pence, the strongest since Nov. 2008. “We look at the current rebound against the dollar as a corrective move” after it sank earlier this year, Stannard said. Sterling has weakened 0.5 percent against the dollar this quarter, and 6.6 percent this year. Gilt Sale The two-year yield gained two basis points to 0.74 percent. The 10-year gilt yield fell one basis point to 3.37 percent. It touched 3.36 percent earlier, the lowest since Oct. 9. Concern that economic growth will stall amid Europe’s sovereign-debt crisis has helped gilts return 5.6 percent this year, compared with gains of 6.7 percent for German government bonds and 5.2 percent for U.S. Treasuries, according to Bloomberg/EFFAS indexes. The U.K. government plans to sell a 4.25 percent gilt due 2040 through banks this week, following more than $12 billion of securities being offered today from nations including Italy and Belgium. Books for the new gilt sale are expected to open tomorrow, subject to market conditions, according to a banker involved in the transaction. The Debt Management Office, which handles bond sales for the Treasury, said June 11 that Barclays Plc, Morgan Stanley, Nomura International Plc and Royal Bank of Canada Capital Markets had been asked to sell the securities in a so-called syndicated transaction. ‘Policy Divergence’ Sterling will resume declining against the dollar as fiscal retrenchment in Europe and the U.K. slows growth relative to the U.S., according to Bank of Tokyo-Mitsubishi UFJ. “We would agree with the U.S. stance and find it difficult to fathom the idea of rushing through fiscal consolidation measures to appease ratings agencies that played a key role in orchestrating the onset of the entire financial crisis,” Derek Halpenny, European head of global currency research, wrote in a report today. “This policy divergence is likely to mean that both the euro and the pound will resume their descent against the U.S. dollar over the coming months.” Sterling slipped earlier today after a report showed house prices rose the least in five months in June. The average home price in England and Wales gained 0.1 percent from May to 158,900 pounds ($237,317), London-based property researcher Hometrack Ltd. said. A separate report from Savills Plc said second-quarter luxury-home prices in central London, defined as properties worth more than 1 million pounds, rose by the smallest amount in five quarters. ‘Fiscal Tightening’ Gains by the U.K. pound may be limited as investors bet the government’s budget cuts will hinder the economic recovery, Goldman Sachs Group Inc. said. “At some stage the impact of fiscal tightening on growth will become visible and at that stage, weaker demand could translate into weaker sterling again,” analysts including Thomas Stolper in London wrote in an e-mailed report received today. “But just how much is tough to say.” --With assistance from Matthew Brown and Lukanyo Mnyanda in London. Editors: Keith Campbell, David Clarke. To contact the reporter on this story: Keith Jenkins in London at Kjenkins3@bloomberg.net To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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